Mike Preston

Under no circumstances can you reclaim the money allocated to other participants. That money is gone. Now it becomes a simple matter: 1) Does she repay? 2) If so, are there forfs in the year that can be used to establish the account? 3) If not, the employer must deposit funds. I don't think there are any other options.

I have a plan with a deceased participant whose beneficiaries were subject to 1.401(a)(9)-5;Q&A7. The section specifies the life expectancy for continuing required minimum distributions from a qualified plan in the case of multiple beneficiaries. For simplicity's sake, the Plan Administrator elected not to establish separate accounts. Hence, the life expectancy of the oldest beneficiary was used to determine ongoing RMD's from the plan. Some of the beneficiaries wish to roll over their share of the participant's remaining benefits to non-spousal IRA's. The plan has no objection and wishes to accomodate the beneficiaries. To the extent necessary, the plan was amended to ensure that it allowed for non-spousal rollovers. The beneficiaries are now wondering whether the election made by the plan administrator not to establish separate accounts requires that ongoing RMD calculations from the separate inherited IRA's be determined based on the single (shortest) life expectancy, as was the case while the monies were in the qualified plan. Notice 2007-7 states quite clearly that non-spouse inherited IRA's should determine the RMD .... " if the employee dies on or after his or her required beginning date, the required minimum distribution under the IRA for any year after the year of death must be determined using the same applicable distribution period as would have been used under the plan if the direct rollover had not occurred. " If my description isn't clear, please ask for clarification.

No.

However, they do count towards the requirement that PS plans have substantial and recurring contributions. I would take the position that they count and that participants are not entitled to vesting unless or until either the IRS said so on audit or a participant asserted that full vesting was required due to the period of time without PS contributions. Something tells me that since they count for substantial and recurring they also count to avoid full vesting.

Since the HCE's do not make more than the social security integration threshold, permitted disparity won't get you anything. Oh, well. Since the 48 year old makes so little, a corrective contribution of about $75 will make the test pass. Is that an option? If so, do that and be done with this. If you can't make that kind of corrective contribution, or would prefer not to, add the following information: Account balance at end of year (including allocated earnings, if any). Date of participation Date of hire Salaries for the two plan years immediately before this plan year. That should provide enough info to see whether any sort of restructuring will work. Maybe.

I don't understand why testing on contributions with permitted disparity fails. Can you post those numbers? Will need the salaries to confirm.

I agree with whatever austin has to say on this subject. If I don't, I'll pipe up.

Yes, it has been. The IRS has a code section that allows for some things to be automatically extended if the deadline falls on a weekend or holiday. The IRS takes the position that the aforementioned code section does not apply to minimum funding. I don't agree with them, but heck, forewarned is forearmed, right?

Of course, don't I always?

No. Never has been.

Sorry I missed your response. This is a kind of busy time of year and time is short for everybody. You appear to have 3 courses of action: 1) Hire a lawyer to write a letter to your union saying that you relied on the advice of your representatives and try to make them live up to what they promised you. You might be able to find out some information about whether the union can do what they promised by calling the carrier directly. 2) Go to your employer in China and tell them that they need to pay for the benefits that they promised to pay for. The fact that the cost is higher than what you or they originally thought may not be relevant. If they agreed to pay, then they may be required to pay. 3) Recognize that the cost for continuing your health coverage is well beyond what you thought it would be, but that you have no choice but to pay for it. I left out choice 4, which is allow your coverage to lapse. I don't think that is wise. Maybe somebody else can come up with a better idea. Good luck. mike

I was talking about plans that were new in 2005 or 2006 or are new in 2007 and maybe 2008.

Here's a nasty interpretation for you. Are you using your GUST document to adopt a db plan rather than a not-yet-approved EGTRRA document? Are you adopting the plan document and then providing for the applicable EGTRRA amendments? If so, are you stuck using the 150% rule solely on the pre-EGTRRA compensation limits? <evil laugh>

They are correct to include all contribution types in the ABT, so it is certainly possible that the plan doesn't satisfy the ABT. But I'd test it on all possible scenarios before giving up: annual with permitted disparity, accrued to date, etc., etc. These are not for the weak-kneed amongst us, of course, as there is a lot of work to get some of those tests correct (in terms of collection of data we might not otherwise have available easily). It also looks like your actual test is not using permitted disparity (can't be sure, but it looks that way). You might want to check. And it looks to me like a simple test on the basis of contributions with permitted disparity is likely to pass, but I would need to see salaries to confirm. If all else fails and you have a rate group that fails, all you can do is provide bigger benefits in the form of a retroactive amendment to make it work.

Proportional except in circumstances dealing with pre 1987 amounts. I won't go into the details on those as they are rarely relevant today.

I am at a loss to understand how the ABT is failing. Have you checked their numbers by hand? Even just multiplying the HCE's percentage by .7 you get a number which is less than what the NHCE's got, so it passes on a contributions basis. Something must be going on here that you haven't let us know.

Yes. There was a thread on this very point recently. You should be able to find it without too much difficulty.

How is it failing? Doesn't the plan easily pass the ABT?

How much to say to a client about this issue is a judgement call. Certainly some form of it must be communicated to everyone. But there are some where you will be planting a seed that you would rather not plant if you go into too much detail. There are others where it is imperative to give them as much insight into this issue as possible. Some are stuffed shirts and need chapter and verse. Others are easy to deal with and some good (and fun) analogies make for a light-hearted, but informative, conversation.

Once. But I am either too old to remember or I was too young at the time, or both.

I'm not stating an opinion, just noting a trend: the IRS will challenge your plan for the first year: 2000 on the fact pattern you have shown. There are some IRS districts that believe the premium must be paid before the end of the year. And they are adept at writing really long letters that say so. However, assuming you wish to disuade them from such an opinion, how could a failure to provide for the premium applicable to the 2006 year result in the plan being anything other than a non-412(i) plan for the 2006 year?

You are on the right path. There is at least one PLR that agrees with you. I agree it is a sort of facts and circumstances analysis, but the PLR was based on the two entities not existing at the same time. The greater the separation the better off one is. Sole props don't provide as much separation as separate corporations.

Doug, what is your cite for not being able to allow hardships?

Even though I agree with your conclusion, I don't see your logic in the last post. The example in the regs indicates that the balance of the 2006 catch-up allowance ($600) will be excluded from the ADP test done as of 10/31/07. What we were talking about was whether (using this example as a base) $600 could be used to eliminate a refund even if the $600 wasn't treated as a catchup in 2006. Slightly different fact pattern. Nonetheless, in re-reading 1.414(v)-1©(3), I'm convinced that the only reasonable interpretation is to treat the amounts deferred in 2005 (as originally posited by the OP) as catchups in 2006 even though there are zero actual deferrals in 2006. I asked the question of an ERISA attorney (who shall remain nameless unless he/she gives me permission to identify him/her by name) and s/he was quick to say that this is the correct result.

Thanks. I should have just looked at our SPD drafting specs. It would have said the same thing!